On October 19, 2021, the CFPB announced that it entered a consent order against a Florida-based financial services company, resolving claims that the company violated the Unfair, Deceptive, Abusive Acts and Practices (UDAAP) provisions of the Consumer Financial Protection Act (CFPA), 12 U.S.C. § 5536(a) by charging unlawful fees, and the Electronic Funds Transfer Act, 15 U.S.C. § 1693k(2) (EFTA) and its implementing Regulation E, 12 C.F.R. § 1005.10(e)(2), by requiring consumers to sign up for prepaid cards as a condition of receiving government benefits. The company is a major provider of prepaid debit card products and other financial services to prison and jail systems throughout the county.
Specifically, the CFPB alleged the company violated the CFPA by charging consumers with unavoidable fees in order to access their own money stored on the company’s prepaid cards at the time of the consumer’s release from jail or prison. According to the Bureau, consumers could not choose how to receive their money upon release, nor did the company provide a way for consumers to close their accounts to obtain their card balance without paying a fee. The CFPB also alleged the company violated the EFTA and Regulation E by requiring consumers in certain states (California, Colorado, and Georgia) to sign up for its prepaid cards in order to receive certain prison-related government benefits, such as “gate money”–which is funding provided under certain states’ laws to help prisoners meet basic and essential needs upon release from incarceration. The CFPB also alleged the company charged unauthorized fees not included in its cardholder agreement, as well as misrepresented fees in certain states where consumers were provided with inaccurate and/or incomplete cardholder agreements.
Under the terms of the consent order, the company must pay $4 million in consumer redress and $2 million in civil penalties. The company is also prohibited from any future violations of the CFPA, EFTA, and Regulation E and, along with other conditions and limitations, is prohibited from charging fees on the prepaid cards except for an inactivity fee after 90 days of inactivity.